The law of comparative advantage suggests that
A)mutually beneficial trade can take place whenever the pre-trade relative costs of production differ between nations.
B)trade is comparatively more beneficial to big countries than small ones.
C)mutually beneficial trade requires each country to have an absolute advantage in the production of at least one good.
D)consumption cannot exceed production-possibilities frontiers.
E)mature capitalism is inherently exploitative of small nations.

Question

Quizplus · Accepted Answer

The law of comparative advantage states that countries should specialize in producing goods for which they have a lower opportunity cost relative to other countries, and trade can occur whenever there are differences in the relative costs of production. This suggests that mutually beneficial trade can take place whenever pre-trade relative costs of production differ between nations.

The Law of Comparative Advantage Suggests That